The Armageddon Index: betting on the collapse of the US dollar was never so popular

5yr CDS on the debt of the United States of America closed at 42bps yesterday – widening further on yet more bailout news: more rumours surrounding the planned “historic” Obama stimulus package.
Bloomberg, by-the-by have estimated the total – potential – US government support to the markets to be somewhere around $7.7 trillion.

Thus the continuing upward movement of CDS on the USA. The graph below shows the spread on the benchmark 5 year senior contract.
USA CDS

And so we announce the inauguration of the FT Alphaville Armageddon Index: of US corporations supposedly less likely to default than the US government. Testament either to the foibles of illiquid CDS readings or the folly of the UST. You decide.

Safer than the USA:

AT&T Mobility (28bps)
Baxter International (24.5bps)
Campbell Soup (31bps)
Ingersoll Rand (40bps)
Lockheed Martin (30bps)
McDonalds (29.5bps)
Wyeth (35bps)

So thats drugs, canned goods, arms firms and haemophilia experts. Sounds about right.

Update: So it turns out the Reuters machine at FT AV HQ wasn’t spitting out the right CDS numbers. A quick look at Markit Desktop gives some more reliable figs, which unfortunately slim down our inaugural index to just one constituent: AT&T, trading at 44bps, par with the US. Coming close is Baxter, with a spread of 45bps on its 5yr senior swaps. Campbell soup next at 50bps. The others all between 60 and 80bps.

Original source

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